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Tuesday, January 31, 2012

This Hyderabad based Satellite and Telecom equipment manufacturer reported good performance for the latest December quarter. Its posted a turnover of Rs.12 Cr v/s Rs.3 Cr and a net profit of Rs.3 Cr v/s Rs.1 Cr .AVANTEL's products are used in Telecommunication,Defense and Aeronautics sectors.In recent past company was in news on its supply of P-8I Mobile Satellite Service System to Boeing . Successful execution of this prestigious order is expected to bring more business for this niche company in future.Recently company concluded a share buy back program at a maximum price of Rs.70/-.It is expected to re rate based on the good performance .Long term prospects depends on its ability to secure more orders going forward .Current market price is Rs.62.50/-

Thursday, January 26, 2012

Veljan Denison is one of my old recommendations @ Rs.375 /-. After hitting a high of Rs.456 , it is now trading around Rs.307. Recently company allotted shares on rights basis in the ratio of 1:4 at a price of just Rs.10/-. Effectively cost per share reduced to Rs.320/- Company also declared a dividend of 75 % .For the quarter ended December 2011, company posted a turnover of Rs.23 Cr v/s Rs.18 Cr and a net profit of Rs.5.5 Cr v/s Rs.3 Cr .Nine month profit jumped to Rs.10.8 Cr v/s Rs.6.8 Cr and EPS is Rs.48/- on the expanded equity .Recommending a HOLD at CMP of Rs.307/-

Saturday, January 21, 2012

A BUY recommendation on Suzlon Energy at this point of time may raise the eyebrows of many of my readers.But I feels the risk reward ratio warrants a re-look on this wind power major in current situation.Suzlon was a shining star in Indian stock market till 2008.Then the company decided to take over a German Wind power company RE Power mainly to acquire the latest technology and designing capabilities owned by that company. There were many blade cracking issues at that time against Suzlon and the latest technology was inevitable to tide over these problems.As per the German laws technology transfer is not permitted if the company is not a 100 % Subsidiary. So suzlon forced to buyout the 100 % stake in RE Power which stretched the balance sheet of Suzlon with higher debt .On the other side ,company's business went through a tough time mainly because of the western recession which started in 2008.Whenever the recession starts cost of conventional energy sources like crude ,coal ..etc nose-dives and non conventional sources become less attractive. Such a situation created problems not only for Suzlon but all non conventional energy related firms.Suzlon posted losses in 2009-2011 period and even the existence of the company became a big question mark.Series of these incidents bring down the share price of this once considered blue chip from Rs.415 to just Rs.17/- ( after adjusted FV split) in this January. In order to tide over the difficult situation company even sold its acquired stake in Hansen transmission ..etc .

Now Suzlon is left with a debt of around Rs.11000 - 12000 Cr including the FCCB re payment liabilities.No doubt it is a real concern .But we should not ignore the positives as well and also the crash of its share price during this period due to these negatives.After a sharp crash in energy prices during the recessionary period , now it again started to move up with a vengeance .Coal and crude prices moved sharply even only with small signs of recovery in US economy .In 2007-08, the cost of one unit of power from wind energy was Rs. 5,compared to Rs. 2 to Rs. 2.75 for coal.Today, the cost of wind power has come down to between Rs. 3.25 and Rs. 3.5, while the price of power from coal has increased to Rs. 3 to Rs. 3.10.This situation is expected to continue in favor of wind power in coming years.This is one of the biggest positive for the entire industry and such a situation will surely increase the order flow to Suzlon which is considered as one of the word's low cost producer of wind turbines.Considering the policy paralysis in power sector ,no doubt India will face severe power shortage in coming years which may open up big opportunities for companies like Suzlon. The recently introduced wind turbine S9X which is designed for low wind area is receiving very good response from the customers. After many many years , now company is reporting good order flow on a consolidated basis and it crossed 5 GW for the first time after 2008 . This increases the visibility of cash flows and it is expected to post a profit of Rs 450- 500 Cr in current year and Rs.700 Cr in next year on a consolidated basis.This cash flow along with their plans to sell some non core assets and cash reserve of about Rs.1700 cr with RE power and about Rs.1000 Cr receivables from its debtors are expected to help the company to tide over the debt trap.Company management also expressed their confidence to reduce debt equity ratio in coming years.Regarding the selling of 2 % promoter stake in November ,Mr Tulsi R Tanti MD of Suzlon categorically cleared that the selling was a one-off event and will not repeat in future.Even after the selling still promoters are holding about 52 % stake in the company.Out of this 52 % stake about 94 % is pledged .But it is a point to note that 90 % of these shares are pledged as a secondary security and chances are very rare to come this shares in to market even if there is a fall in its share prices.All together I strongly feels that the worst is over for Suzlon and company will be able to repay its debt if something worst is not happening in Western economies again .Company's share price is expected to re-rate with the full year results and repayment of first installment which will happen in June of this year.An early improvement of European economies will surely help Suzlon a lot to capture the past glory.If the management can keep the promises of their decision to not sell the shares in open market again - at current market price of Rs.24 / - the risk reward ratio is positive for an investment.

Thursday, January 19, 2012

Agrotech Foods Ltd is one of my old recommendations @ Rs.327 /-( Click HERE for the old posting ) .For the quarter ended September , company posted a 7.2% decline in net sales to Rs 180.84 crore and an increase of 14.9% to Rs 11.23 crore in net profit.These results are satisfactory considering the fact that the company sold its Vanaspati business recently and this quarter result is excluding this business. A HOLD at current market price of Rs.420/-

Saturday, January 14, 2012

Last week we have discussed the long term prospects of sugar sector stocks.Many of them appreciated in an average of 20% in last week itself.Tea is another agriculture commodity having cyclical nature like Sugar.But the government control over this sector is very low compared with Sugar sector hence the supply demand scenario determines the price for a large extent.Tea prices showing a declining trend for a long time and now it is showing some signs of uptrend after a consolidation.As a true reflection of this trend , share prices of many of the listed tea sector stocks are hovering around multi month lows.From this tea pack I am selecting one company which is not so familiar for many of you - Rossell India Ltd.There is many other companies in this sector but I feels this company's diversification plans makes it more attractive than other companies from the same sector.
Company having Five tea estates in Assam in an area of 4000 hectares.For the last financial year Rossell posted a turnover of Rs.80 Cr and a net profit of Rs.18 Cr EPS is Rs.5/- ( FV Rs,2 Shares). In addition to the conventional Tea business company having two more divisions- Aerospace/defense , and Hospitality. Potential of these sectors differentiate this company from other tea companies.Under the Bangalore headquartered Aerospace and defense division - Rossell Techsys- company is offering services like custom embedded systems product design and development, product support services including Installation, testing, commissioning and maintenance, test solutions including test jigs, rigs, and simulators etc , and wire harness engineering and looming.Company representing many foreign companies like MacSema in India for their various products and services in Aerospace and defense.This division having an approximate employee strength of 70.

Recently company started a hospitality division to increase its presence in this sector.It is a point to note that company already having some experience in this field through their strategic investments in a company which is running the franchise of 'YUM'( owners of brands like KFC, Pizza Hut, and Taco Bell) in Nigeria.Few months before Rossell decided to start fast food chains in various cities in India too .It is not clear at this point that whether this is through a master franchise agreement of any well known brands or not.Anyway their previous experience in this field will be an added advantage.Apart from this ,company also having some interest in Lemon Tree Hotels which is running 12 hotel properties across India.

Company's share price is currently trading at Rs.40 /- with a P/E of 6 on the expected full year EPS of Rs.7/-. Considering the chances of an improvement in Tea prices, it is at the lower level .If the upcoming fast food chain venture turn as a success and defense and aerospace division posts decent growth after the expected opening of private sector in defense , this unknown stock may be re rated sharply. Only on the valuation of Tea division itself it is a better pick from the tea pack @ Rs.38/-

* Some of the information's ( About their Nigerian ventures) are taken from Company website .No guarantee for its Authenticity

Wednesday, January 11, 2012

LESSON 1: There is no such thing as a good stockThere are only good companies. When someone tells you ‘this is a good stock’ you need to look beyond the stock chart. Why is the company a good company? How will it grow its business? If you can’t answer these questions, you don’t know what you own.LESSON 2: Have a premiseWhen you buy a stock you must have a premise. A premise is a reason why that particular stock will go up. For best results, the premise will be one that explains why the company’s line of business will increase, and why the marketplace will value that business at current or higher multiples. Without a premise, you don’t own an investment, you just own a stock.LESSON 3: Think trends. Buy stocksIf you really want to invest in big growth stocks, you need to invest in secular trends. Secular trends are events unrelated to either the economy or individual company events. The advent of the PC, the birth of the Internet, and the desire for wireless phones, are all secular trends. The biggest investment winners are those companies which are ideally placed to reap the benefits of large secular changes.Microsoft and Intel rode the transition to PCs as computing power became cheaper and cheaper. Nokia, Motorola, Qualcomm, and Ericsson all found them-selves unable to keep up with demand in the mid 1990s, when wireless phones finally reached the critical price points. If you want really big winners, find the trend, then find the stocks.LESSON 4: Know your risk toleranceThe biggest mistake most investors make is to buy positions with more risk than they can really tolerate. This is where most people got hurt in the Internet bubble burst. They had no idea they owned risky stocks. If you can always tolerate, both financially and emotionally, the complete loss of your entire position, you obviously will be okay. But most people aren’t in that position. Figure out how much downside you can live with without having to sell. Figure this out before you buy the stock.LESSON 5: Don’t average down to feel better‘Averaging down’ is often a way to lose more. If you believe in the company, and the price goes down, you may want to invest more. But if you, like many others, purchase more simply to lower your ‘break even’ stock price, you are making a mistake. If you find yourself calculating new ‘average price per share’ points, you might be averaging down for the wrong reason.LESSON 6: Don’t miss the train to shave a dimeIf you are investing in a major trend through a stock, and have a multi-year investment horizon, what difference does a few cents per share make on your purchase? Many investors try to place buys with limit orders just below the ask, and wind up missing the purchase.If you really want a stock, particularly a big position, place a limit order at the ask, or even slightly higher. You will at least get the order. This is especially important if you are trying to buy far more shares than the current ask size. If you are right about the trend, you will never miss the extra ten cents per share.LESSON 7: Don’t buy hot and watch coldMany investors buy a ‘hot stock’ and immediately look for big gains. When they don’t happen, the stock falls away from the daily attention list. Pretty soon it starts to edge downward, and, emotionally, the investor stops watching it.Pain avoidance is common to us all. But you can’t let pain avoidance prevent you from watching your stock. If you do, you often take a look two months later and find the stock is far from hot, and you are now presented with a really painful decision.LESSON 8: A hold is as good as a buyThere is no such thing as a ‘hold’ decision. If you wouldn’t buy the stock again today, assuming you had additional money, you should either sell, or admit that you are confused. Resolve the confusion. The hold condition often happens when you have owned a stock for years, are way ahead of your basis, and are basically happy.But what is driving the stock today? What will make the price rise in the future? Why would you buy the stock today, assuming you didn’t own it? If you don’t know, you don’t have a premise for this stock. LESSON 9: Don’t be an inadvertent long-term holderWhen your premise doesn’t work out, or you no longer believe in the stock, you must sell, even if it means a loss. Holding on just to ‘get my money back’ is the single biggest reason for losing more money. Who owned all those stocks that lost 98 per cent of their value in 2000? A good percentage was owned by people who turned into long-term holders inadvertently, when they made the decision to just stick it out.LESSON 10: You will lose moneyYou won’t be right every time. If you are going to be an investor, you need to become accustomed to losing money on some positions. This rule is the natural consequence of living up to rules 5, 7, and 9. Taking losses is often the only way you can save your capital from further losses.

Saturday, January 7, 2012

I know, many of you will not support an idea of buying the shares of companies from sugar sector at this point of time.Yes, there is lot of negatives like lower sugar price,high interest burden,excess government control ...etc.But we can't ignore the fact that all these negatives and more are reflecting in the stock price of each and every sugar company. Most of them are trading at their 5 to 10 year lows and such a situation is surely an opportunity to buy these type cyclical stocks at rock bottom prices for investors with patience.Sugar companies are currently going through rough weather mainly because of lower product price worldwide .But this situation is expected to reverse in one year due to lower production.( Generally it is the nature of many agri commodities) .The expected rise in crude prices going forward may also influence the sugar price positively in coming years.Whenever the crude price moves higher and sugar price comes down large manufactorors like Brazil will surely give much preferance for the production of Ethanol over sugar and such a situation will create lower supply situation of sugar in world markets.Moreoevr the current worst situation may lead to the closure of many small sugar mills and the chances of a consolidation in this industry is very much.The most important factor at this point of time regarding the sugar industry in India is the high probability for a reduction in goverment control in this sector.Chances are very high for some favourable developments in this direction after the upcoming state elections.All together, I feels many sugar companies are value buys at current market price for a genuine investor with long term view.Consider at current market price , Shree Renuka @ Rs.26/- , Rajshree Sugar @ Rs.32/-,Dhampur Sugar@ Rs.31/- and Thiru Arooran @ Rs.70/-

Tuesday, January 3, 2012

I have recommended a BUY on Dr Agarwal's Eye Hospital on July 28,2010 @ Rs.71/- ( Click HERE for old posting ). Today it hits its life time high and currently trading @ Rs.127/-, an appreciation of about 75 % .One can book profit at current market price.